On Wednesday (29 April) the Edcon group released a statement announcing that its board has passed a resolution authorising it to file for business rescue in the next few days.
Since the coronavirus outbreak in South Africa, and the president’s first announcement on Sunday 15 March, Edcon says it has lost R2 billion in sales.
The statement reads that the R2 billion lost sales have consumed the group’s remaining cash as it had to recover the costs from its reserves. The loss in sales and a decline in its collections of the debtor’s book means Edcon is “unable to pay its suppliers for both the March and April month-ends.”
“The R2.7 billion (circa R230 million of which was still due to be received to March 2021) cash provided to Edcon in the last restructuring has been substantially utilised funding the losses for the financial years ending March 2019, and March 2020, as planned,” the group said.
Chief executive, Grant Pattison, said: “We will be working closely with the appointed Business Rescue Practitioners, shareholders and government to find a way to plug the financial hole. It is my hope that some version of the business will emerge to continue to serve customers. The safety and well-being of our employees, customers and partner employees is our priority as we open up again. I am unable to provide any further information at this stage other than to say that the company will continue to keep you updated on developments as the situation unfolds.”
According to the statement, paying April salaries will require assistance from the UIF Covid-19 TERS program.
During level 4 lockdown restrictions starting 1 May, the Edcon group stores will be open, however, it anticipates that sales will be weak for some time during the “COVID-19 Risk-Adjusted Strategy” phase, which could last for several months.
The group hopes that the business rescue decision will give them more time to raise funds.
